Why I'm cheap

Let's say you're interested in expanding your horizons and seeing the world, and so you decide to book a lovely week long vacation to Tokyo for two at the modest price of $2,700. "This is only a fraction of my salary," you might rationalize, "I can easily afford this, and it would be a wonderful experience". It seems that this is how most people think about the decision, but, critically, they're ignoring the time-value of the money.

Scenario 2

A better way to look at the problem is to say "we could invest the $2,700, and in 10 years we could expect to have $5,800 to go to both Tokyo and Paris. Or we could wait 20 years and have ~$12,600 (~5 trips to Tokyo); 30 years and have ~$27,000 (~10 trips to Tokyo); or 40 years and have ~$59,000 (~22 trips to Tokyo)."

Scenario 2 is still inherently selfish; it's just delaying the vacation until later in life, when you will be able to get more and better vacations. But I think this is still too short sighted, and I go a step further:

Scenario 3

I could stay home, read a book about Tokyo, invest the money, let it grow. If I let that $2,700 grow for 77 years, it would be worth over $1,000,000. True, I wouldn't be around to make use of it, but I'll take $1M for my grandchildren over an extravagant vacation for myself.

And consider this . . .

In 100 years, it will be worth nearly $6M.
In 144 years, it will exceed the NET worth of LeBron James ($170M).
In 166 years, it will have reached ~$1B (BILLION).
In 215 years, it will exceed the NET worth of Bill Gates ($40B).
In 257 years, it will have reached ~$1T (TRILLION).
In 290 years, it will exceed the current value of the U.S. GDP ($13T).
In 309 years, it will exceed the current value of the Gross World Product ($56T).

. . . all for what was originally a modest vacation for two.

That might seem surreal, but do the math yourself. I assumed an 8% annual growth rate.

This is why try to be careful with every dollar -- because it's hard to justify needlessly spending a dollar on myself when I know it could be worth so much more given a little time.

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